Questions
1.
A country reports nominal GDP growth of 9% and inflation of 6%. Its stock-market index declines while unemployment begins to rise. Which conclusion is most appropriate?
A. Real GDP grew by approximately 15%, and both indicators are lagging
B. Real GDP grew by approximately 3%; the stock index is leading and unemployment is lagging
C. Real GDP fell by approximately 3%; unemployment is a leading indicator
D. Real GDP grew by approximately 3%; both indicators are coincident
2.
A bank introduces biometric onboarding through a mobile application. Subsequently, legislation requires explicit customer consent, deletion of personal information and penalties for non-compliance. Which PESTEL classification is most appropriate for the new requirements?
A. Technological, because biometric systems use advanced software
B. Legal, because enforceable obligations and penalties have been introduced
C. Social, because customers are concerned about privacy
D. Ecological, because electronic onboarding reduces paper usage
3.
A government offers tax credits for artificial-intelligence research but is also preparing mandatory rules on algorithmic accountability. Which classification is most appropriate?
A. Both developments are purely technological
B. Tax credits are an economic factor, while accountability rules are social
C. Tax credits represent political policy, while mandatory accountability rules represent a legal factor
D. Both developments are legal because they originate from government
4.
A product operates in a market growing at 14% annually. Its sales are Rs. 40 million while the largest competitor’s sales are Rs. 100 million. Under the BCG matrix, the product is most likely a:
A. Star
B. Cash cow
C. Question mark
D. Dog
5.
An industry has high fixed costs, slow demand growth, low product differentiation and expensive exit barriers. Which competitive force is most directly strengthened?
A. Bargaining power of suppliers
B. Threat of substitutes
C. Competitive rivalry
D. Threat of new entrants
6.
A courier company identifies “same-day delivery” as a critical success factor. It develops regional depots and advanced routing software. Which statement is correct?
A. Regional depots are the KPI, while same-day delivery is a critical competence
B. Routing software is a CSF, while customer satisfaction is a resource
C. Regional depots and routing capability support the critical competence, while the percentage of orders delivered the same day is a KPI
D. The number of competitors is the most suitable KPI for same-day delivery
7.
Under the American Accounting Association model, management identifies the facts, ethical issues, applicable values and alternative actions. It then selects an option without considering the likely effects of each alternative. Which stage has been omitted?
A. Identifying the facts
B. Identifying the norms, principles and values
C. Analysing the consequences of each alternative
D. Identifying the ethical issue
8.
A government regulator must approve a company’s sustainability project and is highly interested in its environmental performance. An environmental NGO has high interest but limited formal authority. Under Mendelow’s matrix, they should respectively be classified as:
A. Keep satisfied; monitor
B. Key player; keep informed
C. Keep informed; key player
D. Monitor; keep satisfied
9.
Under a Musharakah arrangement, Partner X contributes 70% of the capital and Partner Y contributes 30%. They validly agree to share profits equally. A normal business loss of Rs. 20 million occurs. How should it be allocated?
A. Rs. 10 million to each partner
B. Rs. 14 million to X and Rs. 6 million to Y
C. According to the agreed profit-sharing ratio
D. Entirely to the partner managing the business
10.
A company has the following market-value capital structure:
- Equity: Rs. 600 million
- Debt: Rs. 400 million
- Equity beta: 1.20
- Risk-free return: 8%
- Market return: 14%
- Pre-tax cost of debt: 10%
- Tax rate: 30%
What is the company’s approximate WACC?
A. 10.60%
B. 11.92%
C. 13.12%
D. 15.20%
11.
A Pakistani exporter will receive USD 200,000 after three months and wishes to eliminate exchange-rate uncertainty through a forward contract. Which bank quotation should be used?
A. The bank’s three-month forward selling rate because the exporter will buy dollars
B. The bank’s three-month forward buying rate because the bank will buy dollars from the exporter
C. The spot buying rate because forward rates apply only to importers
D. The spot selling rate because the exporter will sell rupees
12.
Budgeted sales for next month are 10,000 units. Closing finished-goods inventory must equal 20% of the following month’s sales of 12,000 units. Opening finished-goods inventory is 1,800 units.
Each unit requires 3 kg of material. Closing material inventory must equal 10% of the following month’s production requirement of 11,000 units. Opening material inventory is 2,700 kg.
How many kilograms should be purchased next month?
A. 30,900 kg
B. 31,800 kg
C. 32,400 kg
D. 33,300 kg
13.
A company’s current cash operating cycle consists of:
- Inventory period: 70 days
- Receivables period: 50 days
- Payables period: 35 days
Management reduces inventory holding by 8 days and extends the payables period by 5 days. The receivables period remains unchanged. What is the revised cash operating cycle?
A. 67 days
B. 72 days
C. 77 days
D. 82 days
14.
A project requires a machine costing Rs. 20 million. It will use land that can currently be sold for Rs. 6 million. Development expenditure of Rs. 2 million has already been incurred.
The project will generate after-tax operating cash inflows of Rs. 8 million annually for three years. Working capital of Rs. 3 million is required immediately and will be fully recovered in year 3. The machine will be sold for Rs. 2 million in year 3.
At a 10% discount rate, the discount factors for years 1–3 are 0.909, 0.826 and 0.751. What is the approximate NPV?
A. Positive Rs. 0.64 million
B. Negative Rs. 3.36 million
C. Negative Rs. 5.36 million
D. Positive Rs. 5.36 million
15.
Two mutually exclusive projects have the same initial investment and life. Project A has the higher NPV at the company’s cost of capital, while Project B has the higher IRR because most of its cash inflows arise earlier. Which decision is most appropriate?
A. Select Project B because IRR always overrides NPV
B. Select Project A because NPV measures the increase in shareholder wealth at the required return
C. Reject both projects because conflicting rankings invalidate both methods
D. Select Project B because earlier cash flows must always create more shareholder value
Answer Key and Short Explanations
| MCQ | Answer | Short explanation |
|---|---|---|
| 1 | B | Approximate real growth is 9% − 6% = 3%. Stock indices generally anticipate future conditions, whereas unemployment usually responds after economic conditions change. |
| 2 | B | The technology created the context, but the enforceable consent, deletion and penalty requirements are legal factors. |
| 3 | C | Fiscal incentives reflect government policy, while mandatory accountability obligations arise from the legal environment. |
| 4 | C | Relative market share is 40 ÷ 100 = 0.40, which is low, while 14% market growth is high. The product is a question mark. |
| 5 | C | High fixed costs, slow growth, limited differentiation and difficult exit encourage competitors to fight intensely for existing demand. |
| 6 | C | The capability and resources enable superior delivery performance. A quantified delivery percentage is the KPI used to measure achievement. |
| 7 | C | The AAA model requires consideration of the consequences of each available course of action before the final decision. |
| 8 | B | A regulator with high power and high interest is a key player. A low-power but interested NGO should normally be kept informed. |
| 9 | B | Musharakah profit may follow an agreed ratio, but normal losses must follow the capital-contribution ratio: 70:30. |
| 10 | B | Cost of equity = 8% + 1.20(14% − 8%) = 15.2%. After-tax debt cost = 10%(1 − 30%) = 7%. WACC = 60%(15.2%) + 40%(7%) = 11.92%. |
| 11 | B | The exporter will sell dollars to the bank. Therefore, the bank’s forward buying rate applies. |
| 12 | C | Production = 10,000 + 2,400 − 1,800 = 10,600 units. Material purchases = 10,600×3 + 11,000×3×10% − 2,700 = 32,400 kg. |
| 13 | B | Revised cycle = (70 − 8) + 50 − (35 + 5) = 72 days. |
| 14 | C | Initial relevant outflow = 20 + 6 opportunity cost + 3 working capital = Rs. 29m. The Rs. 2m development cost is sunk. PV inflows = 8×0.909 + 8×0.826 + 13×0.751 = Rs. 23.643m. NPV = negative Rs. 5.357m. |
| 15 | B | For mutually exclusive investments, the project with the higher NPV at the cost of capital should normally be selected because it creates greater shareholder value. |